The Bitcoin ETF Mirage

The Bitcoin ETF mirage: A critique for the fiat currency skeptic

The Bitcoin conundrum

Bitcoin, the world’s first successful digital currency, has grown from an internet experiment into a global financial phenomenon. It has attracted an eclectic mix of enthusiasts: from those who see it as the future of money to those who see it as a peer-to-peer cash, or an immutable store of data, or those who view it as a hedge against the instability of traditional fiat currencies. Now, we have to grapple with a new variable with the introduction of Bitcoin exchange-traded funds (ETFs) and the potential for BlackRock to take a serious position in the Bitcoin economy.

A brief history of ETFs

Exchange-traded funds have been a staple of the traditional financial ecosystem since the early 1990s. Their primary purpose is to offer diversification and liquidity, similar to mutual funds while being tradable on stock exchanges. Generally considered low-risk financial instruments, ETFs often track the performance of a particular index or basket of assets, offering retail investors a ‘safer’ entry into the market. They are a conservative investment vehicle for conservative assets. For example, the largest ETF today is the “SPY” ticker, which is an ETF of the S&P 500—largely regarded as the most conservative equity investment in the United States.

The irony of a Bitcoin ETF

Now, the irony of a Bitcoin ETF is too glaring to ignore. Bitcoin often claims to be the punk rock revolt against traditional banking and financial systems. I’m not a huge fan of this idea, but it is the popular and generally consensus idea about Bitcoin for the time being. Where everyone should agree is that Bitcoin was designed to be distributed, free from intermediaries, and directly empowering for individual users. Introducing Bitcoin to the ETF realm is like capturing a wild stallion to pull a plow; it dulls the very essence of what it’s meant to be and only benefits the kinds of people that Bitcoin was intended to disrupt. Don’t you Fink?

Financialization erodes purpose

One of the most poignant criticisms against the creation of a Bitcoin ETF lies in the very ethos upon which Bitcoin was founded. Satoshi Nakamoto didn’t envision Bitcoin as a tool to further financialize the world or bolster an increasingly speculative gambler’s economy. Instead, the core philosophy was to provide a peer-to-peer version of electronic cash, granting financial sovereignty to individual economic actors. Bitcoin was meant to break the chains of complex financial institutions that monopolize assets, control the money supply, and dictate the rules of economic engagement for everyone else. Introducing a Bitcoin ETF doesn’t just distort this vision—it actively undermines it. By centralizing Bitcoin ownership within the structure of an ETF, the power dynamics shift dramatically. Suddenly, the issuers of the ETF become the gatekeepers of Bitcoin’s accessibility, dictating terms and reaping profits from transaction fees and fund management, all while diluting the autonomy and control that individual ‘bitcoiners’ should wield over their own assets. Essentially, the Bitcoin ETF moves counter to the decentralizing spirit of Bitcoin, consolidating authority back into the hands of a select few, thereby disenfranchising the most critical stakeholder in the entire Bitcoin ecosystem: you.

The middleman dilemma

ETFs also reintroduce new middlemen—custodians, fund managers, market makers. In other words, Bitcoin ETFs reopen the doors to the very entities Bitcoin was created to sidestep. This brings an extra layer of fees and a buffet of potential points of failure, including the risk of regulatory interference. The end result is a far cry from Bitcoin’s original promise while also decoupling value from economic utility!

When you invest in a Bitcoin ETF, you don’t own Bitcoin; you own shares of a fund that owns Bitcoin. This separation creates layers between the people and the utility of Bitcoin as a medium for peer-to-peer transactions or the data that can be attached to them. It becomes another tradable asset subject to the whims of Wall Street rather than a revolutionary tool for financial freedom. It’s essentially hyper-antibitcoinization.

Loss of sovereignty and the illusion of conservatism

A Bitcoin ETF functions within the traditional financial framework and is subject to regulations and controls that often undermine the libertarian values at the heart of Bitcoin. It exposes your holdings to the risks of seizure, complex taxation, or sudden regulatory shifts—all antithetical to the self-sovereign ethos of Bitcoin’s founding.

Given that ETFs are usually conservative instruments, there’s an absurdity in linking them to a volatile asset like Bitcoin. Yes, it’s the best-performing asset of the last decade, but it’s also prone to 90% drawdowns that last for years, and the gains always seem to happen overnight, too.

However, this conservative nature opens an interesting but longshot possibility—could more stable, utility-driven derivatives like BSV and BCH ever be included to create a kind of ‘Bitcoin Basket Index ETF’? While unorthodox, this could bring the kind of stability that ETF investors traditionally seek. For investors who never had the option to buy unsplit Bitcoin prior to August 2017, this might be an enticing option to depoliticize risk in the risk-on portion of their portfolios. Yet, even then, we’d need to question if such a move would be constructive or continue to strip away the radical essence of Bitcoin’s original design, which is pursued in varying ways by BSV and BCH.

The self-sustaining nature of Bitcoin

Finally, while we can question the pros and cons, it is essential to ask if Bitcoin even needs an ETF in the first place. With increasing adoption, better accessibility, improved user interfaces for direct trading, and the advent of things like Ordinals, which simplify the self-sovereign manner in which assets can be held, the answer seems negative. An ETF simplifies investment at the cost of reducing Bitcoin to a speculative asset, distancing from its utility and potential as a disruptor of the existing financial paradigm.


For those disillusioned with the current fiat system, a Bitcoin ETF is a paradoxical construct. It undercuts Bitcoin’s promises of decentralization, self-sovereignty, and liberation from conventional financial systems. It transforms Bitcoin from a revolutionary force into another piece in the jigsaw of an already flawed financial landscape.

Bitcoin was born out of necessity and nurtured by a community that believed in financial freedom and autonomy. It’s time to ponder: Is the comfort of a Bitcoin ETF worth the compromise? It’s time we tread cautiously, for we risk taming the revolutionary fervor that gave birth to Bitcoin in the first place.

And that’s ignoring all the other baggage that BlackRock brings to the conversation.

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